Thursday, July 24, 2008

Rio Tinto CEO: smelter 'dead' for lack of gas

A large aluminium smelter planned for Ruwais is “dead” after being denied access to cheap energy supplies generated by natural gas, Dick Evans, the chief executive of Rio Tinto, a partner in the project, said yesterday.

The smelter is the latest and largest casualty of a shortage of gas in the emirate, which has left heavy industries and power utilities scrambling for alternative sources of electricity, including nuclear reactors and coal plants.

Rio Tinto, one of the world’s largest metal companies, and Abu Dhabi Basic Industries Corporation (Adbic) had planned for the smelter to begin production of 700,000 tonnes of aluminium per year by 2010.

In November, officials said they had finalised a US$2 billion (Dh7.3bn) financing plan for the smelter, which they estimated would cost a total of $5bn each for two capacity expansions of 700,000 tonnes a year.

But Gulf nations are getting more from their limited gas reserves by directing them toward the chemical, fertilizer and liquefied natural gas industries rather than burning them for power generation, Mr Evans told Bloomberg yesterday.

Aluminium production is an incredibly energy-intensive business, and smelters need access to a dedicated, uninterrupted supply of electricity equivalent to the needs of a small city.

The fate of the Ruwais smelter has been in quiet limbo for the last several months, as Adbic officials have shied away from the confident portrait they gave of the project last fall.

A shortage of easily available natural gas in the UAE has been a central question of the Government’s energy policy for years. As a response, the nation began importing two billion cubic feet of natural gas per day from Qatar, which is rich in gas, through the Dolphin pipeline last July.

Earlier this month, the Abu Dhabi National Oil Company signed a deal with ConocoPhillips, a US oil major, to develop so-called “sour” gas fields in Shah that will unlock one billion cubic feet of gas per day.

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